Monday, March 2, 2009

How Big is the Budget: Part I

There is no question that the new budget and deficit is BIG. Felix at his Market Movers blog tries to put the current budget in perspective:
It's pretty much impossible to get one's head around the sheer enormity of the numbers in Barack Obama's first budget. But it's important to try, and one anonymous commenter has a very good point: the entire federal budget, as submitted by President Clinton in 1996 through 1999, was smaller than the budget deficit that Obama is proposing for next year.


While this obviously ignores inflation, it does put the vastness of the budget in perspective. His next comparison brought out a lot of criticism from readers, but I think they miss the point (remember, this is just about putting it all in perspective):
Obama's total budget is $3.6 trillion, which works out at $34,000 per household; median household income is about $50,000. Which basically means that for every dollar that a US household earns, the US government plans to spend 68 cents next year. And the ten-year T-bond still yields less than 3%. Extraordinary.

Criticism was raised that he was comparing a per family average (the budget portion) with a median (rather than average) household income. His point (I believe) is that for the median family out there earning ~$50,000 this year, the government is chipping in an additional $34,000. That my friends, is some government spending!

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6 comments:

  1. AnonymousMarch 2, 2009 at 3:00 PM

    Does anyone know the value of Federal Assets? This budget has a lot more assets than most, especially if there is a profit on some of the bank investments.

    We have trillions in liabilities. Are the investments in the highway system, national parks, the military assets, NASA, etc. worth more?

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  2. JakeMarch 2, 2009 at 3:16 PM

    are the assets actually backing the liabilities? what i mean is, if we can't pay interest to china, are we giving them the grand canyon?

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  3. antonwMarch 3, 2009 at 8:48 AM

    Only if they want to buy it.

    The last big deficit outflow was to Japan and they went on an asset buying binge over paying for for Pebble beach and many other places.

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  4. antonwMarch 3, 2009 at 9:00 AM

    The point I am trying to make is we are on a cash budget system so if you want to measure the effects of borrowing, you need to consider what we are spending on.

    Google Interesting Thoughts Concerning Society and check out number 8.

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  5. JakeMarch 3, 2009 at 3:52 PM

    i think the key was that the economy was able to outgrow the debt burden. if that's the case this go around, great!

    it's important to note that i actually think the spending IS needed, but it is important to understand how large this budget / budget deficit is.

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  6. antonwMarch 4, 2009 at 6:59 AM

    A good way to measure the debt isas a percent of GDP and interest as a percent NNP. See

    http://www.businessbookmall.com/Economics_17_Budget_Deficits.htm

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